Labor Participation
Feb 2014 report: "Good news" - U.S. total employment is only a few months away from reaching its peak (2007-08). The total number of people employed fell off by about 6 million people, and has now risen over 5 million from the bottom. The "bad news" is: the working-age population grew by about 12 million in the meanwhile; and employment is only just getting back to the pre-12 million level.
Participation rate: Oddly, of those 12 million, 10 million say they aren't looking for work! The "participation rate" has plunged. Today, anyone listening to business news knows that is one reason the unemployment rate has improved; i.e. fewer people have been looking for jobs.
Not Early Retirement: The other day, a talking head on TV said that people are taking early retirement. Sounds plausible, but it shows ignorance. Here are two charts for U.S. men aged 55-64
The mid 1990s, saw a reversal of a long-term down-trend. Instead, more men in this age group have considered themselves part of the labor force (top line), and have actually been employed (bottom line).
Look at the blue ovals.
The recent recession has not seen any change in the percent who want to participate. The actual employment fell, and then has risen.
BTW, the gap between those two lines shows "unemployment".
Not an aging population: It is true that the U.S. population is aging, and it is true that this will continue to bring down the participation rate. However, this does not explain the last few years. Rather, it is the younger age groups that have seen a drastic fall off in participation rate.
More kids going to college full-time: Participation rates among younger age groups have fallen.
I don't know if kids are really going back to college at a hugely higher rate than before, or if they've simply given up looking, since their families can support them. I assume it is a mix of both.
College loans are up significantly. And, more kids are staying with their parents for longer. Chances are that many who have given up, would actually like to work.
This data is for males and females, summed up. That might explain the increase in the 1950s and 1960s.
Source: BLS series (LNU00000012Q,LNU01000012Q,LNU00024887Q,LNU01024887Q) with some computations and averaging.
Men 35-44 years: This is the best sex/age group to understand the core of unemployment. It is not confounded by three major social-trends: youth working vs. studying, women working outside the home, and retirement patterns. Here's what the data looks like for this group:
Long-term trend: The most striking thing is that the lower participation rate is a very long-term trend, not something recent.
In the 1950s, about 97% of men in this age group wanted to work. In the 1990s -- even before the dot.com bust -- it was 92%. So, where did that 5% go? What are they up to?
We know they are not in the army, nor are they incarcerated, because those two populations are excluded from the base numbers already.
In a 1980 paper "The Decline in Male Labor Force Participation", Donald Parsons created a model of how increased disability payments might, hypothetically, lower the participation rate. The projections matched the actual data, showing that the model was plausible.
Have more people moved on to disability rolls, supported by tax-payers? [Though disability rolls did rise since the dot.com bust, they only explain part of the data.] Are they being supported by family, and perhaps indirectly by other welfare schemes? Are they working, but saying they are not? I do not know. I would love to see a recent study that focuses on that 5% and explains why they are not looking for work, and who is paying their way.
Short-term: Consider the last two decades from the chart. The participation rate fell faster than trend during the current recession. This explains why many economists say that the major factors behind the drop are cyclical, not secular. In other words, the rate was falling, and the great recession caused it to fall much faster.
If so, we should see the rate start to flatten, and perhaps rise a bit, and finally get back to its downward trend.
If conditions in the economy improve, participation will stop falling, and the unemployment rate will stagnate, and may be rise. .
Summary: Long term participation rates are falling among working-age adults. The consequence is less people working to produce things in the economy. This is an important long-term issue, that ought to be address by cutting back on disability payments and other long-term welfare. The short term rate fell sharply with the recession, and will probably flatten, causing the unemployment rate to flatten too. The real danger is that we have a new recession sometime in the next few years, and our current position becomes the best we'll ever have!
[A previous post on the same subject is here.]
Participation rate: Oddly, of those 12 million, 10 million say they aren't looking for work! The "participation rate" has plunged. Today, anyone listening to business news knows that is one reason the unemployment rate has improved; i.e. fewer people have been looking for jobs.
Not Early Retirement: The other day, a talking head on TV said that people are taking early retirement. Sounds plausible, but it shows ignorance. Here are two charts for U.S. men aged 55-64
Look at the blue ovals.
The recent recession has not seen any change in the percent who want to participate. The actual employment fell, and then has risen.
BTW, the gap between those two lines shows "unemployment".
Not an aging population: It is true that the U.S. population is aging, and it is true that this will continue to bring down the participation rate. However, this does not explain the last few years. Rather, it is the younger age groups that have seen a drastic fall off in participation rate.
More kids going to college full-time: Participation rates among younger age groups have fallen.
College loans are up significantly. And, more kids are staying with their parents for longer. Chances are that many who have given up, would actually like to work.
This data is for males and females, summed up. That might explain the increase in the 1950s and 1960s.
Source: BLS series (LNU00000012Q,LNU01000012Q,LNU00024887Q,LNU01024887Q) with some computations and averaging.
Men 35-44 years: This is the best sex/age group to understand the core of unemployment. It is not confounded by three major social-trends: youth working vs. studying, women working outside the home, and retirement patterns. Here's what the data looks like for this group:
In the 1950s, about 97% of men in this age group wanted to work. In the 1990s -- even before the dot.com bust -- it was 92%. So, where did that 5% go? What are they up to?
We know they are not in the army, nor are they incarcerated, because those two populations are excluded from the base numbers already.
In a 1980 paper "The Decline in Male Labor Force Participation", Donald Parsons created a model of how increased disability payments might, hypothetically, lower the participation rate. The projections matched the actual data, showing that the model was plausible.
Have more people moved on to disability rolls, supported by tax-payers? [Though disability rolls did rise since the dot.com bust, they only explain part of the data.] Are they being supported by family, and perhaps indirectly by other welfare schemes? Are they working, but saying they are not? I do not know. I would love to see a recent study that focuses on that 5% and explains why they are not looking for work, and who is paying their way.
Short-term: Consider the last two decades from the chart. The participation rate fell faster than trend during the current recession. This explains why many economists say that the major factors behind the drop are cyclical, not secular. In other words, the rate was falling, and the great recession caused it to fall much faster.If so, we should see the rate start to flatten, and perhaps rise a bit, and finally get back to its downward trend.
If conditions in the economy improve, participation will stop falling, and the unemployment rate will stagnate, and may be rise. .
Summary: Long term participation rates are falling among working-age adults. The consequence is less people working to produce things in the economy. This is an important long-term issue, that ought to be address by cutting back on disability payments and other long-term welfare. The short term rate fell sharply with the recession, and will probably flatten, causing the unemployment rate to flatten too. The real danger is that we have a new recession sometime in the next few years, and our current position becomes the best we'll ever have!
[A previous post on the same subject is here.]
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